Muzinich raises €104m at first close of senior debt fund

The fund will adopt a conservative strategy and incorporate ESG into its investment process.

Muzinich & Co has held a first close on its Muzinich European Senior Secured Private Debt Fund at €104 million.

The vehicle has a target of €500 million and hopes to hold a final close during 2020. It will adopt a conservative lending strategy and have a strong ESG focus.

So far, the vehicle has received interest from both existing and new investors in Muzinich funds. The LP base consists mainly of insurers and French institutions at this stage, though Muzinich will broaden the geographic footprint of the fund’s investor base for future closes.

The investment strategy will focus on providing growth finance for European mid-market companies. It will predominantly invest in euro-denominated, senior-secured first lien debt issued by SMEs across Europe but excluding the UK. The UK is being excluded to avoid currency risk and non-euro-denominated debt. Muzinich said the strategy will target a net return of Euribor plus 4 percent.

“Senior-secured debt instruments offer investors a lower-risk approach to private debt investing,” said Sandrine Richard, the firm’s co-head of senior secured, Europe. “These instruments tend to have statistically higher recovery rates, possess superior documents and provide strong covenant protection.”

The vehicle has a three-year investment period after final close and a seven-year amortised period with fund extensions up to a maximum of two consecutive one-year periods.

Muzinich said it would integrate ESG considerations from its public debt investment process into its private credit operation with this strategy. The firm also said that systematic inclusion of ESG into the due diligence process, investment committee and portfolio company engagement would make a positive contribution to the fund.